Proposed Indonesian Labour Outsourcing Decree: An Overview

February 21, 2012

Indonesia has of late emerged as one of the throbbing outsourcing destination. While the process of outsourcing was mushrooming in the region, the number of complains coming against such outsourcing practice regarding long working hours, temporary nature of the work and adverse effect of such outsourcing on domestic workers also increased.

In the waves of these problems, Indonesian court passed a new judgment on 17th January, 2012 which declares outsourcing as unconstitutional because of the precariousness outsourcing causes over the livelihood of domestic workers. The court also emphasized on the fact that Indonesian workers have the right to a decent job and a decent life.

In order to tackle these problems related to outsourcing, Manpower and Transmigration minister of Indonesia, Muhaimin Iskandar, recently proposed to pass a decree which is supposed to protect the interest of domestic workers while also guaranteeing decent working conditions to workers engaged in the outsourcing industry.

The new decree would prescribe the kind of work that can be outsourced. The decree stipulates that only peripheral work can be outsourced while core work cannot come within the ambit of outsourcing. This stance is aimed at protecting the interest of domestic workers who find themselves losing their job because of cheap, efficient and time effective outsourcing facilities available in Indonesia. To ensure the implementation of this provision, the Minister stipulated tight monitoring of outsourcing workers and the kind of work that can be outsourced to them.

The Act nevertheless also takes care of the interest of outsourcing workers who work under adverse conditions under temporary work agreements and are paid daily wages without any collateral benefits. The decree is supposedly going to provide outsourcing workers with the same benefits and salary as a permanent worker.

It is important to mention here that Indonesia already had a Act on outsourcing i.e. Act No. 13 Year 2003 which prescribed that companies can outsource only a part of their job that has to be a supporting job. Such process of outsourcing had to be governed by an agreement prescribing the nature of work, period of work, number of holidays and the provision of health insurance.

The Act No. 13 Year 2003, however, did not delve into detail regarding the outsourcing process, the new decree as proposed by the Manpower and Transmigration minister can act well in regulating the outsourcing industry that would be in better interest of outsourcers as well as service providers.